Concrete testing co. indicted on fraud charges

October 30, 2008 5:27:02 PM PDT

Eyewitness News

NEW YORK --

Prosecutors unveiled a sweeping fraud and corruption indictment Thursday against a company hired to test concrete and steel at more than 100 major construction sites in the New York City area, raising questions about the durability of the projects. The charges involve some of the most high-profile buildings in the city, including Yankee Stadium, the Freedom Tower, the United Nations and the Metropolitan Museum of Art, Manhattan District Attorney Robert Morgenthau said. Other projects included hospitals, firehouses, schools, subway stations, an Atlantic City casino and a new terminal at John F. Kennedy International Airport.

Testwell Laboratories, its president and 11 other officials were charged with enterprise corruption and a list of other counts for allegedly faking test results and overcharging for work they never did. Morgenthau said the defendants were motivated by greed.

The defendants strongly denied the allegations.

It wasn't clear if any of the projects were built with weak materials that posed safety hazards. Some officials said tests showed concrete below the standard they wanted, but said major projects including Yankee Stadium, a JetBlue terminal at Kennedy Airport and the Freedom Tower at the World Trade Center site were structurally sound.

But the retesting of those and other projects - many of them commissioned by the government - "raise the cost of construction in New York City," Morgenthau said.

The Department of Buildings suspended the company's license to do business in the city and said Thursday it was meeting with building owners "to develop procedures to assess the structural integrity of these buildings."

The city has also retested some of the 102 projects, but wouldn't say how many.

The Port Authority of New York and New Jersey - which is building the 1,776-foot-tall Freedom Tower - did say that it found about 300 cubic yards of the tower's concrete foundation monitored by Testwell was below the desired strength, withstanding 9,000 pounds per square inch instead of 12,000 pounds per square inch.

The agency left the concrete there, saying it was still nearly twice as strong as most New York City buildings and made up a fraction of a percent of the concrete that will make up the city's tallest tower.

The Metropolitan Transit Authority, which used Testwell for a dozen projects, found some results from concrete strength tests to be "a bit lower, but nothing structurally significant," MTA inspector general Barry Kluger said.

Attorneys for Testwell and president V. Reddy Kancharla have said they are innocent and would vigorously contest the charges.

"The company looks forward to restoring its reputation and vindicating itself," Testwell attorney Martin Adelman said.

Ten of the 12 defendants and the company pleaded not guilty Thursday in Manhattan's state Supreme Court, where they were arraigned on charges that included enterprise corruption - the state equivalent of racketeering charges - grand larceny, attempted grand larceny, scheming to defraud, offering a false instrument for filing and falsifying business records.

The most serious charge - enterprise corruption - is punishable by up to 25 years in prison.

Prosecutors said two of the defendants live in South Carolina, where they were arrested, and are awaiting extradition.

Justice Edward McLaughlin approved the bail packages that had been worked out between prosecutors and defense attorneys and ordered the defendants to return to court Nov. 18. He told Kancharla, whose bail was set at $1.2 million, to return Friday morning with his Indian passport.

Morgenthau says he began the investigation in the spring when he received information from the Port Authority, the Yankees, and John Jay College about testing problems at the Freedom Tower, the new Yankee stadium and a university project.

Prosecutors credited a Port Authority engineer with being first to notice inconsistencies with Testwell's work. The engineer would notice that Testwell employees didn't appear to be taking handwritten notes at various sites, but then written reports would have detailed numerical values measuring concrete strength. They also found handwritten notes for various projects that didn't match with official reports delivered later.

"These charges are serious. But these actions endangered lives of people, and that makes them doubly serious," Morgenthau said.